Nice vaccine; pity there's no distribution mechanism

See By Scott Sumner.

"Many people are horrified by the prospects of introducing the profit motive into health care. Thus they oppose paying kidney donors, even though it would save tens of thousands of lives. They oppose price gouging on masks or vaccines, even though it would save many lives. They oppose challenge studies for vaccines, even though it would have brought us a vaccine much sooner, thus saving many lives.

Instead, we end up with a government controlled health care regime, where decisions are made by slow and cumbersome bureaucracies.

In a libertarian society, the pandemic might already be essentially over. That’s not to say that libertarianism is necessarily precisely “optimal”, as indeed there is a market failure aspect to pandemics, due to the external effects of infection. Yet despite the theoretical case for government intervention, in reality it does much more harm than good.

Critics of libertarianism make the following errors:

1. Ignoring the Lucas Critique: They assume that behavior in a highly regulated society is similar to what it would be in a libertarian society.  When interviewed, several Swedes indicated that they didn’t see any need for masks because the Swedish government told them they were not needed. People don’t behave like sheep in a libertarian society; they learn to be responsible for their own decisions. Before FDIC, people took an active interest in the safety of the banks where they deposited their hard earned money. Now nobody cares how recklessly their bank lends out their money—it’s all insured. And yet I see opponents of abolishing FDIC argue that people are not able to ascertain whether banks are safe.

2. People underestimate the pervasiveness of government regulation: Occasionally one encounters progressives describing America’s socialist health care system as a free market system, which is absurd.  Or they’ll say “There was nothing to prevent health care firm X from doing what you suggest.”  Yes there was; health care providers are so enmeshed in our over-regulated system that they have almost no ability to engage in creative problem solving.  Suppose a vaccine company pursues an ambitious plan to speed vaccine development.  They ask participants to sign as waver promising not to sue if things go bad.  How would that contract hold up in court?

3.  Externalities cut both ways: Progressives like to talk about externalities as a market failure. They also like to suggest that selling vaccines to the highest bidder is an abhorrent idea.  But you can’t have it both ways.  The externality aspect of pandemics means that a program that vaccinates people more rapidly also helps those who are not yet vaccinated.  In other words, when it comes to pandemics, “externality” is just another word for “trickle-down theory”.  A free market regime that uses the profit motive to vaccinate 20 million people in December is superior to a bureaucratic regime that vaccinates 5 million people in December, even if the free market allocation is in some sense “unfair”.

4.  Cultural norms also matter in a libertarian society: Just as people put up phony arguments against utilitarianism by positing abhorrent policies that supposedly increase aggregate utility but actually make society more unhappy, progressives make phony arguments against libertarianism by ignoring the fact that our ethical instincts would still exist in a libertarian society.  Bill Gates doesn’t stop donating tens of billions of dollars for the provision of health care to the world’s poor just because we deregulate.  Catholic hospitals don’t suddenly ignore ethical considerations just because we deregulate.  Society is still there, with all its instincts and norms.  We don’t all become Gordon Gekko; indeed people are “nicer” in capitalist countries than in communist countries.  What we get through deregulation is competition; if some of our institutions are creating roadblocks then other institutions (or even foreign countries) will provide services to those willing to pay. To attract progressives, maybe we should start calling competition “diversity”.

5. Bureaucrats use cost/benefit analysis, for themselves: Yes, bureaucrats weigh costs and benefits.  They consider the cost to their career in letting a bad product out prematurely and the cost to their career of a “better safe than sorry” long delay in testing a new product.  Unfortunately the outcome that is best for the individual bureaucrat is almost never the outcome that is optimal for society as a whole.

This twitter thread discusses how the US government botched the vaccine rollout.  And this Alex Tabarrok post discusses how the Canadians do it better.  (Tyler Cowen makes a similar point.)  Our government also botched testing, masks, challenge studies, etc.  And now tens of thousands are dying as a result.  Socialism kills."